Valpak deals in big numbers. The direct mail company's highly automated $220 million plant in St. Petersburg churns out 20 billion coupons a year wrapped in 520 million distinctive blue envelopes. They land in mail boxes of 45 million households in the United States and Canada. Valpak was shaken last year by news that parent Cox Enterprises put it on a list of properties for sale. Then came layoffs of 79 employees, about 6 percent of its work force, amid sluggish sales forecasts. Now, Cox says the future looks promising and plans for a sale are history. Valpak's top executives, president Jim Sampey and his boss, Greg Bicket of Cox Target Media, recently talked with the Times about how the business works and its good performance in a tough year for direct mailers:
Who's your target customer?
Sampey: A 24- to 54-year-old female in a household with kids. Higher household income, $75,000 and above.
How do customers handle the blue envelope?
Sampey: We call it the Valpak shuffle. They pull the content out. They look at each piece and pull out one, two, three — whatever number they think they're going to use. It's a 3-second view per coupon. They look at the headline to see who the advertiser is. Then they'll look to the right to see the offer, then to the left where there's an image of what the offer may be.
How many people open the envelope? How many advertiser coupons are actually used?
Bicket: Ninety-two percent open it, 86 percent look at most of the coupons and 66 percent look at every coupon in the envelope. For redemption numbers, something like a McDonald's or a Burger King could be in the double-digit rate. If you're a home-improvement company where you're replacing windows or roofs, one-tenth of 1 percent would make you happy.
Is the coupon business a good place to be in an economic downturn?
Bicket: There's no question coupon redemption is higher in times of economic difficulty. There have been articles that quote a 25 percent higher redemption rate than a couple of years ago. The important thing is a lot of advertising gets inferred results. You're positioning yourself as a swell company, but there's no transaction. We trigger transactions.
Like all advertisers, Valpak had hard times as the recession kicked in last year. Have you seen signs of recovery?
Bicket: Valpak is often first down in a recession and first up when the recovery begins. It's ticked up by market segment. The home repair category — both roofers and plumbers and those who provide products for do-it-yourselfers — was dead as a doornail a year ago.
Sampey: In July and August, we started seeing some orders coming in (from customers) that we hadn't seen all year.
Who else is coming back?
Bicket: It's coming largely from local retailers that recognize they've got to stay front of mind to stay healthy until recovery returns. National business we haven't seen in a long time. We're getting hard orders from people who didn't want to plan things a year ago. They'd buy (month to month) but not sign up for contracts a year ago. Like the telecom sector.
Sampey: The AutoNations and the DirecTVs.
Bicket: The dining sector tell us they're pleased. Even though they're taking some discounts on the primary meal, they're seeing bigger (checks). For example, come in with two or more and enjoy dessert on us. Instead of two people coming, sometimes there were four people coming. The check was higher than it would have been.
How is Valpak performing this year?
Bicket: We'll be down in 2009 (in revenue) but a fraction of what direct mail is down. The industry numbers nationally are down 20 to 24 percent nationally. It's brutal. We'll be about a quarter of that — 5 to 7 percent.